After reaching a June 2016 high of $51.62, oil prices have slumped 16%.

Supply and demand issues are returning, as production resumes in roiled hot spots, such as Nigeria and Canada, where firestorms cut higher levels of oil output.

Renewed strength in the U.S. dollar is putting pressure on the resource at well. 

Others warn that oil refineries generated too much supply without demand.  Oil storage tanks in Cushing, Oklahoma are nearing full capacity after a recent 1.1 million-barrel inventory build.

The U.S. Energy Information Administration found the oil market is still producing 500,000 barrels a day above demand.  OPEC production just increased by a quarter million barrels a day, reaching an all-time high of 32.6 million barrels a day, as well.

Global oil demand in the third quarter of 2016 is growing at less than a third of the rate it did year over year, according to The Wall Street Journal. 

The number of oilrigs in the U.S. are beginning to climb again, too, increasing concerns of even greater supply hitting a global market sloshing around in an over-abundance of oil.  In fact, the U.S. rig count just climbed to 371 – marking the fourth weekly increase. 

You won’t find many Americans complaining, though

When pump prices fell to an average of $2.40 in 2015 – down from an average of $3.34 – U.S. drivers could have saved $540 per car per year.    

The overall impact was big, handing consumers more than $130 billion to spend.

More than 80% of consumers spent those savings on new cars and trucks…  Another 20% of gas savings was spent on eating in restaurants.  That would help explain why Darden Restaurants (DRI) rocketed from a 2015 low of $48.82 to more than $65 a share.

Others smoked and drank their savings – great news for doctors.  But it also handed windfall profits to companies such as Monster Beverage (MNST) and Altria Group (MO).

Now, according to data released by the AAA, U.S. gas prices have fallen to their lower point since April 2016, putting even more savings in wallets across America.

And consumers aren’t complaining about that.   

The average pump price is now 56 cents less year-over-year and could give a boost to sales of high-profit SUVs and trucks. 

Not only is that great news for U.S. consumers, the GDP could flourish as well.

As lower oil prices put more money in the pockets of millions of Americans, it’ll open a great deal of opportunities in undervalued stocks, as well, most notably in retail. 

Other sectors that should outperform include airlines, travel, shipping and freight stocks. 

With oil-related stocks continuing to fall, you could see one in the next issue of The Cheap Investor.

Leave a Reply

Your email address will not be published. Required fields are marked *

Post comment